A Market Assessment for This Week
A market assessment of this week would have to conclude that this market just doesn’t want to go down very much, despite the growing signs of weakness in the background. I detailed some of that weakness in last Friday’s post, which you can read here: Signs of Weakness in the Markets.
And, in fact, more weakness appeared over the last week. We can see this on the weekly chart. Note the deep dip down. This drew out selling as seen in the volume. The rally back up left the weekly in no better a position than the prior week, closing level. Lots of activity; no measurable result. In Japan Candle terminology, this would be considered a weekly hanging person.
We would also note a fairy sizable down wave compared to other recent down waves. This, too, is a marker of supply. Recent up waves have also been shortening.
Despite all this, the market rallied on Friday, closing firm. It did so on declining volume, which we see on the daily chart. If you look on an intraday chart of, say, a 3 or 4 hour chart, you’ll see the declining volume clearly. You will also see some weakness at the top of the intraday trend, indicating at least an intraday reaction is likely.
Beside the weakness in the background, we also know the Federal Reserve has been active, adding liquidity to the market after reducing interest rates. This can certainly prop the market.
From a technical perspective, watch the trading around the recent highs (3158.00) early in the week. If the market is unable to rally through the 3160 area or puts in a lower high (e.g., Friday’s high doesn’t get broken) and starts falling, we could see the market come back down to the 3120 area (2-3 day highs) before finding support. If a strong down move really gets going over the next couple of days, we could break last week’s lows and head towards the 3020-25 area. I think this is less likely, given the lack of cause, but certainly possible.
Should the market push up and through the 3160 level, it could rally up to about 3200.
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